Recent cases of hedge fund fraud have caused large losses for investors and have fueled the debate regarding the ability of regulators to
oversee the industry. This paper proposes a set of performance flags, based on suspicious patterns in returns, as indicators of a heightened risk
of fraud. We collect a sample of hedge funds charged with legal or regulatory violations and find that funds charged with misappropriation,
overvaluation, misrepresentation, or Ponzi schemes trigger the performance flags at a higher frequency than other funds.